As a starting point, it is generally accepted that where compound interest is not expressly provided for in an agreement, only simple interest is due. Compound interest is claimable only in certain defined circumstances namely (a) where parties agree to pay compound interest (b) if the obligation to pay interest is alleged and it is proved that in the circumstances of the agreement (for instance arrear rentals) it is a universal custom in relation to such an agreement (for example a lease) for the creditor to charge compound interest on overdue amounts as a uniformly and universally observed practice throughout South Africa in relation to such an agreement.
It is difficult to establish a universal custom regarding any particular practice and compound interest will seldom be claimable unless the parties expressly provide for it.
[The Rand West City Local Municipality v Quill Associates (Pty) Ltd [2021] ZASCA 150 (26 October 2021)
